The Pensions Act 2008 has placed an obligation on every employer in the UK to add certain staff into a pension scheme and also make contributions into the pension scheme ‘Auto-Enrolment’. It does not matter what business area you operate in, if you employ at least one person, you have certain legal duties toward that employee in respect of pension provision.
The requirement to setup a workplace pension scheme is closely associated with payroll from the requirement to make the correct employee and employer pension payments. Auto-enrolment can seem complicated, time consuming and stressful, so we at Charterhouse have teamed up with St James’ Place Wealth Management and Mo Ladha, an experienced IFA from St James’ Place Wealth Management, to offer a comprehensive service to help our clients setup up the right scheme for their own and their employees' needs while satisfying their legal obligations.
We do recommend that you take professional advice at the earliest opportunity not only to understand and comply with your obligations but also to ensure that you are making the choices that most suit your business and your employees. On numerous occasions we have found that conversations have led to identification of areas in which clients can save money both for the business and personally.
Whether you decide to take professional advice or to go it alone, we have set out below guidance on the various matters that need to be dealt with when considering dealing with your pensions auto-enrolment obligations:-
Step 1: Get ready
Check your staging date and confirm a point of contact with The Pensions Regulator. This should ideally be done four months or more before your staging date. You can check the pensions Regulator website for more information:
Check your staging date
Your staging date is the date when you need to start performing your auto-enrolment duties.
On the staging date you’ll need to have a workplace pension scheme in place. You’ll also need to assess your workforce to see who you need to enroll.
The Pensions Regulator should have written to tell you what your staging date is 12 months beforehand but if you’re unsure, you can find out on their website using the link below.
Find out your staging date: www.thepensionsregulator.gov.uk/employers/staging-date.aspx
If you have passed your staging date, do not panic! Get in touch with us straight away and we can help you get back onto the correct path and hopefully avoid penalties.
Step 2: Set up your workplace pension scheme
Make contact with a reputable Pension Advisor to apply for your company pension scheme or available government scheme. You’ll need to make some decisions beforehand (see steps 3-5)
Make some decisions about how much you will contribute
As an employer you have a legal duty to make pension contributions for any ’jobholders’ who are in your pension scheme. You can also make contributions for any entitled workers if you wish – but you don’t have to.
There’s a minimum amount that you’ll need to contribute by law, but you can contribute more if you want to. Before you set up a pension scheme, you’ll need to decide how much you want to contribute.
If you have a Human Resources (HR) advisor, get them involved, paying to a pension not only has financial implications but also affects the overall remuneration paid to employees. We can put you in touch with HR advisors who can assist in this regard if you would like us to.
Step 3: Assess your workforce
What to do
On the staging date, you must check how much each member of staff earns and how old they are. This is called assessing your workforce, and doing it will tell you what your responsibilities are for each employee.
The table below shows the three different categories your employees may fall into, and what your responsibilities are for each.
||16 to 21
||22 to state pension age (SPA)
||SPA to 74
||Must be enrolled if they ask. You’re not obliged to contribute to their pension pot (but you can if you want)
|Over £5,824 but no more than £10,000
Must be enrolled if they ask. You must contribute to their pension pot.
|£10,000 and over
Must be automatically enrolled. You must contribute to their pension pot.
This table is accurate for the 2017/18 tax year
Step 4: Add staff into your scheme
What to do
All employees will need to be automatically enrolled into the pension scheme.
Every time you pay staff you’ll need to make contributions into the scheme for any eligible and non-eligible jobholders who are in it. In most cases, your employees will also have to contribute.
Step 5: Write to your staff
Once you’ve assessed your staff, by law you must write to them and explain what's going on.
What you need to do
Within six weeks of your staging date, you must write to all your employees individually to explain how auto-enrolment applies to them. You can do this by letter or email.
Payroll providers like Charterhouse may offer software that can produce these letters or emails for you.
Step 6: Declare your compliance
Five months after you’ve reached your staging date, you must complete a declaration of compliance form on The Pensions Regulator’s website.
This tells the regulator how you have met your legal duties. If you don’t complete it on time or the information you submit isn’t correct, you could be fined. The Pensions Regulator’s website includes a declaration checklist showing all the information you’ll need and where you can get it from.
Step 7: Perform your regular duties
Your auto-enrolment duties don’t end once your staging date has passed. Instead it’s a case of "more of the same", as you’ll basically need to perform steps 3 through to 6 regularly for as long as you continue to employ people.
Assess your staff (every pay period)
Every time you pay an employee who you haven’t needed to automatically enrol before (including new staff members), you’ll need to assess them – just as you did on your staging date.
If any employees are now eligible jobholders you’ll need to either automatically enrol them into your scheme or use postponement.
Employees are most likely to become eligible when their pay changes or they pass their 22nd birthday. You must then write to these employees within six weeks of when they were assessed.
Adding staff to your scheme
Anyone who’s been assessed as an eligible jobholder will need to be automatically enrolled into your scheme unless you’re using postponement. You’ll also need to remember to enroll any employees who’ve asked to join your scheme too.
You would do this in the same way as described in step 4.
If employees ask to join your scheme (as opposed to being automatically enrolled), they should be entered into it at the start of the next pay period.
Dealing with employees who opt out of your scheme
If any of your staff who have been automatically enrolled choose to leave your scheme within a month of being entered into it, it’s called ’opting out’.
Within one month of their request, you have to remove them from your scheme, stop taking contributions from their pay and arrange a full refund of what they’ve paid to date. If they ask to leave the scheme after this date any payments already made will remain in the pension plan.
We’ll provide full support, explaining how to do this once you’ve applied to set up your scheme.
Make pension contributions
As we mentioned in step 4, every time you pay your staff you’ll need to calculate how much to contribute for any eligible and non-eligible jobholders who are in your scheme (plus any entitled workers, if you’ve chosen to pay for them).
Step 8: Other tasks you’ll need to perform
Along with the regular tasks you’ll need to perform, there are a few other activities you’ll need to keep on top of.
Keep records (on-going)
By law, you must keep records of how you’ve met your legal duties. These include the names and addresses of those you’ve put into your pension scheme records showing when money was paid into your pension scheme records of any requests to join or leave your pension scheme your pension scheme reference number.
You must keep these records for six years, except for requests to leave the pension scheme, which you’ll need to keep for four years.
Re-certify (at least every 18 months)
If you’re calculating your pension contributions based on something other than qualifying earnings, you’ll need to complete a certificate at least every 18 months. The purpose of doing this is to tell The Pensions Regulator that you’re paying at least the minimum contribution levels required by law.
You can find a template for the certificate you need to fill out in this Department for Work and Pensions guide.
Re-enrolment (every three years)
Around the third anniversary of your staging date, you’ll need to repeat some of the duties you performed on it. This is called automatic re-enrolment. Basically, you must make sure any eligible jobholder who’ve previously opted out of your scheme are put back into it.
You’ll have three months either side of the third anniversary of your staging date in which to choose your re-enrolment date. This gives you six months in which you can choose a re-enrolment date, but you must have the same one for all staff you have to re-enrol.
Charterhouse Auto-enrolment Plan
Charterhouse has extensive knowledge of the operation of pensions auto-enrolment. We have walked numerous clients down the road of satisfying their pensions auto-enrolment obligations. No matter how complex your questions, please do not hesitate to contact Elaine Lynch or Paula Smith (or one of the directors) to discuss how Charterhouse can take over the burden of your obligations and leave you to concentrate on what you do best which is running your business. You will find our contact emails at the bottom of this newsletter.